L4M7 Whole Life Asset Management

Case Study
Hasan works at a large organisation that is responsible for the maintenance of aircrafts. The
maintenance process is as follows: the aircraft comes in and gets checked over and a list of
component parts are drawn up. The aircraft then stands still while the parts are picked from
stock, or ordered if necessary. Once all of the parts are ready, the maintenance process starts.

The warehouse had various pieces of material handling equipment that could be used,
depending on the requirements, such as dollies, pallet trucks, pickers, forklift trucks and vacuum
lifters. The warehouse kept a small quantity of high-risk items in stock to ensure there were no
stockouts. There were a number of high-use items, such as rivets that were used for most of the
aircraft, then there were items that were used less frequently, such as wheels, and stair grips.
Some of the latter could end up being stored for a long time.

The procurement team carried out a review of all the costs associated with inventory, from the
identification of the need, through to end-of-life, in order to identify where savings could be
made.
The costs associated with storing the inventory was much higher than expected, due to the
length of time some of the items were being stored. Some items had been stored for so long
they were obsolete and it was discovered they were losing around 10% of stock each year due
to stock degrading. This was a result of stock not being stored in the correct conditions, as
indicated on the packaging.

A cross-functional team was assembled to investigate if there was a more efficient solution to
cost save. The team explored various options before settling on a solution that used a hoverbed
system. Instead of the aircraft coming in and waiting, the airframe was put on a hoverbed that
moved between different zones. Component parts arrived and were fitted as they were needed.
This reduction in wasted time and the new approach to inventory control resulted in significant
cost savings.

When the new stock control system was implemented, the aircraft organisation liaised with key
suppliers as they planned to move to a dual product code system, which worked by listing the
suppliers’ codes on their database.

In order to move to the new system, the aircraft organisation needed to procure the hoverbed
that the aircraft were due to undergo maintenance on. In accordance with the TCO model, one
of the factors they considered was the maintenance costs of the hoverbed itself. This was a

Leading global excellence in procurement and supply

Use the information provided in the case study to answer these questions.

1. When planning the warehouse layout, which items should be placed nearest the
entrances of the aisles, as determined by the frequency of use in this organisation?
a) Wheels
b) Stair grips
c) Rivets

2. Which piece of material handling equipment would be most suitable to use to move
panes of window glass?
a) Pickers
b) Forklift trucks
c) Vacuum lifters

3. Which of the following symbols is used to indicate that an item needs to be stored within
a specific temperature range?

a)

b)

c)

4. Which of the following does the cost of storing inventory come under?
a) Preliminary costs
b) Placement costs
c) Post-placement costs

5. What method of inventory control did the organisation implement?

6. What advantages did this new method of controlling inventory bring for the aircraft
organisation?

1
 a) Reduced costs associated with storing inventory
b) Reduced costs associated with ordering inventory
c) Reduced risks associated with late delivery

7. What was the benefit of including the suppliers’ product codes in their database?
a) To provide more information about the products
b) To reduce the likelihood of the wrong product being ordered or delivered
c) To provide up-to-date information about the availability of products from each
supplier

8. Which term is used to describe the small quantities of stock that they hold to avoid
stockouts?
a) Buffer stock
b) Redundant stock
c) Direct stock

9. Given the critical nature of the hoverbed, what method of maintenance would be most
appropriate for this fixed asset?
a) Corrective maintenance
b) Reactive maintenance
c) Preventative maintenance

10. The contract for purchasing the hoverbed included a clause that prevented the sale of
the item without prior permission of the supplier. What type of obligation is this?
a) Accounting obligation
b) Contractual obligation
c) Legal obligation

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Answers
1. c) Rivets
2. c) Vacuum lifters

3. c)
4. c) Post-placement costs
5. c) JIT
6. a) Reduced costs associated with storing inventory
7. b) To reduce the likelihood of the wrong product being ordered or delivered
8. a) Buffer stock
9. c) Preventative maintenance
10. b) Contractual obligation